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First Italian Gas Pipeline Completed And Connected

December 9, 2008

The first pipeline to take gas produced by Australia’s Po Valley Energy into markets in northern Italy, has been completed and connected to the country’s gas distribution network.

Po Valley today announced today that the Italian national gas pipeline grid operator, SNAM Rete Gas, had completed construction of the connector pipeline from the Australian company’s Sillaro field near Bologna, to the National Italian pipeline grid.

“This marks a major milestone in progress to put the Sillaro field into production,” Po Valley Chief Executive Officer, Mr Michael Masterman, said today.

“The connection follows closely on last month’s grant by the Italian Government of a 20 year Production Concession for Sillaro,” Mr Masterman said.

The pipeline grid connection, constructed in just eight weeks, was completed at SNAM’s cost. Gas entering the SNAM pipeline grid can be transported to the Italian gas market which consumes 2.9 trillion cubic feet per annum - three times the Australian market. Prices at around A$14 per thousand cubic feet are a multiple of Australian gas prices and transportation costs are very low.

In September this year, Po Valley completed the on-schedule construction of surface plant equipment for Sillaro at a total equipment cost of €2.7m. Following grant of the Sillaro Production Concession, Mr Masterman says the Company now expects to proceed with installation of the surface plant at Sillaro in the third quarter of 2009, enabling connection of the plant to the newly installed pipeline grid connection.

“As gas transportation costs in Italy are very low and as we hold gas reserves in one of the largest gas consumption markets in Europe, this combination of factors is a major financial and strategic advantage for Po Valley.”